Thread: investing plans for high income 30s couple w/ windfall

ok, i've added the percentages of my total portfolio next to the individual asset in my original post, and added the available options for the 401K accounts.. for simplicity, let's ignore my wife's existing portfolio, as it is small in the scheme of things and will throw the percentage calculation slightly out of whack.

Sam, here are two ideas - one keeps the cash, one pays off the house: Taxable 78.71% 49% Total Stock Market 21% FTSE All World Except US VFWIX .40% or Total International VGTSX .34% 8.71% Intermediate Tax-Exempt Bonds His 401(k) 10.23% Pimco Total Return His Beneficiary IRA 11.07% TIPS or Total Bond Market His Roth IRA/Non-Deductible IRA Total Bond Market or TIPS Her 401 Pimco Total Return Her Roth IRA/Non-Deductible IRA Total Bond Market or...

I agree with your tax analysis and further from a psychological point of view a paid off mortgage is a wonderful thing. From my experience most of the very financially secure people I know have paid off their mortgage asap. If you consider all the interest people pay in life it is quite a bundle of money for naught. I am truly adverse to paying interest. Some of the best advice I ever go was earn interest, don't pay it.

Way I look at it is that the mortgage is a negative bond in the portfolio. Currently, your cash is paying nada interest and your mortgage (after-tax adjustments) has a 3%+ rate. Bond holdings are probably B/E relative to mortgage. In essense, your negative bond holding means your equity exposure is higher than the 45.5% you state. Anyway, I vote for the mortgage payoff - but with the caveat that you have plans to live there for a while....

I would NOT pay off the mortgage in your situation. You're getting a 28 year loan at 3.5% (after taxes) which is incredibly cheap. You maintain excellent liquidity. You will be less likely into forced equity (or bond) sales at unfavorable prices should you need excess cash. You have a history of job insecurity; if you were to lose your job in this economy you might easily have 6-18 months of unemployment to fund. I have a 4.25% fixed 15...

yosemitesammy wrote: Now consider that anything I hold with my $182k which will earn a 3.6% after-tax return will carry some sort of risk... Any pointers on a 3.6% investment after-taxes in a taxable account with low risk? I'd certainly feel safer pouring money in the market by the buckets during downturns if I knew my personal risk was reduced by the amount of my mortgage... I hear all the sides for and against.. But consider this: If I...

I was in a somewhat simlar situation as you. I was recently married, and we are going to have our first child in March. We spent the last year traveling the world, going to Maui, Kaua'i, Dublin and Cork in Ireland, Cancun, Cozumel, and my wife just got back from Oahu. I'd strongly suggest you do the same. Once you have little ones, you are pretty much tied down. Spend some of your hard earned income enjoying your new life and each...

yosemitesammy wrote: re: taxes and mortgages... My thinking is along the lines of: what's better? paying 28% of $147k in taxes + $10K interest or paying 28% of $157k in taxes + $0 in interest... I know taxes don't work exactly like this, but you get the idea... keeping the mortgage for the reduction of the tax works out to something like $2500/yr in tax break, while I have to pay another $10k in interest for this $2500/yr tax...

IMO, it's a no brainer. Pay off the mortgage. Being debt free is incredibly liberating. Our current economic mess is due to everybody and their brother being in debt up to their eyeballs. Those without debt will thank their lucky stars they had none. Chris

I can't add anything to the fine detailed financial analysis already provided. But I will encourage you to go slow, think things through and don't become intoxicated by your new found wealth. You might want to get some help from a fee-only (doesn't sell anything but advice/expertise ie no products) financial planner or accountant to run some numbers. But even if you do this, take their advice as another opinion and not as...